Why Is Incorporating a Business Better Than Setting Up a LLP?
It goes without saying that starting a business takes considerable planning in advance. From your fundamental business plan to future growth projections or even an eventual exit strategy, there are countless questions to be answered when you are considering setting up and running an enterprise! However, one of the most fundamental and significant questions a business owner should ask himself is this - which kind of entity will their business be registered as?
While it seems like a straightforward question, what you register your business as will eventually influence your business in a comprehensive manner, from liabilities, taxes compliance to loans and business funding or investments.
This article will guide you on why it is sometimes better to incorporate your business when compared to setting up an LLP. We will also touch on how affordable accounting and bookkeeping services in Singapore can help boost your business capabilities!
Registering your business in Singapore
In Singapore, there are a few types of entities you can register your business as. In this article, we will be discussing:
- Private Limited Company (a.k.a. Pte Ltd or LLC)
- Limited Liability Partnership (LLP)
Besides having their pros and cons, they vary quite a fair bit in terms of the kind of liability the business owner takes on, the ownership structure, the relationship between stakeholders etc.
How does a Private Limited Company compare to a Limited Liability Partnership (LLP)?
Private Limited Company (Pte Ltd)
Limited Liability Partnership (LLP)
The most registered business entity in Singapore
Only about 3%* of businesses formed in 2018 were LLPs.
1 - 50 shareholders and no limit for number of directors
2 - 20 owners with equal ownership
From equity partners, venture funds, business financing etc.
Highly limited to private finances and partners' contributions.
Compliance and Paperwork
*Based on Department of Statistics Singapore’s Yearbook of Statistics Singapore, 2019
What are the pros Private Limited Companies have over LLPs?
- Tax savings – In Singapore, beyond a certain level of business revenue and turnover, paying corporate tax becomes more affordable than paying personal income tax. In this light, Pte Ltds with a sizable business revenue can save more on tax with corporate tax compared to their LLPs counterparts. Not to mention that Pte Ltds also get corporate tax rebates.
- Ease of raising funds – A Pte Ltd Company in Singapore is usually perceived as trusted and credible by banks and other financial intermediaries like venture capitalists. This makes raising capital for expansion much easier than a LLP. LLPs are mostly limited to private financing and partners' contributions.
- Ease of ownership exchange – The full or partial transfer of ownership for a Pte Ltd is a much easier process and can simply be done via shares transfer. Ownership transfer of a LLP will require the sale of each of the assets, licenses, and permits individually.
Choose Sprout Asia as your go-to corporate secretary, accounting and bookkeeping service provider for your Private Limited Company (LLC)
If you are looking for an easy incorporation procedure, lower tax rates, ability to raise funds and better credibility, choosing a Pte Ltd as a business structure could prove to be a better choice
While Pte Ltds are the most found business structure in Singapore, it is always advisable to have a trusted bookkeeping and accounting service provider to maintain compliance with ACRA rules and regulations.
Here is the good news - you do not need an in-house bookkeeper, accountant or even a secretary to meet regulations. This translates to significant cost savings and first-class service standards
Sprout is a specialist at helping new and small companies to maintain its compliance requirement at effective and competitive pricing. We can do this because of our reliance on technology to automate workflow while allowing our team to focus on providing good service.
Schedule a call with Sprout for a complimentary consultation. We can provide insights on how we can add value by providing more insight into your business' financial performance and cash flow, allowing you to make better decisions.
Schedule a call with Sprout for a complementary consultation. We can provide insights on how we can add value by providing more insight into your business' financial performance and cash flow, allowing you to make better decisions.
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